TMI Blog2019 (10) TMI 1435X X X X Extracts X X X X X X X X Extracts X X X X ..... gh court findings, we have to accept the definition/ meanings by higher court and most of the time, meanings and definitions are adopted from other law or from wisdoms of higher courts in Income Tax proceedings. PCIT has taken a strange stand not to follow the Judicial precedents in order to defend his proceedings u/s 263. Accordingly order u/s 263 is set aside. When we observed from the submissions made by Ld. Sr. Counsel and the order passed by revenue authorities, we notice that remuneration for the assessee was fixed when the company was incorporated in 1970 and as per the resolution, the revenue was fixed for the first year at ₹ 3 lakhs and increased to ₹ 5 lakhs over next two years. The revenue was frozen at ₹ 5 lakhs and was fixed in the initial years and the same revenue was continued till date without any revision. This will definitely make any authority to raise their apprehension as the income offered by the assessee are not practical but legal. Therefore, assessee should take this issue with the Govt. of Maharashtra to revise the remuneration- Appeal filed by the assessee stands allowed. - I.T.A. No. 2840/Mum/2019 - - - Dated:- 16-10-2019 - SHRI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its submission is the order passed by Hon ble ITAT for AY 2006-07. Even though the order passed by ITAT, the department has preferred an appeal in Hon ble High Court of Bombay u/s. 260A of Income Tax Act, 1961. According to Pr.CIT, since the appeal has been filed by the Department in the Hon'ble High Court against the order of the Tribunal, if in any subsequent year, orders passed by the Assessing Officers not following the stand which has been taken by the Department, would be in the nature of erroneous orders in so far as they are prejudicial to the interest of revenue. Further, he observed that AO has passed assessment order by only subjecting remuneration of ₹ 5 lakhs under the head Income from Business, but did not take into consideration the income in respect of projects i.e. Navi Mumbai and other Projects etc. Accordingly, he considered the order passed by the Assessing Officer erroneous in so far as it is prejudicial to the interest of revenue. Further, he observed that assessee has filed various material and evidence to establish that the assessee is the agent of the Government of Maharashtra while acting as 'New Town Development Authority' and 'Spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee or by the Hon'ble Tribunal in its order are not considered as supporting the view that the assessee company is the surrogate of the state Government and therefore, tax cannot be imposed on the surrogate as per the provisions of Article 289(1) of the Constitution of India. 7. Further, Pr.CIT observed that as the decisions are not considered applicable in assessee s case, the department has filed the appeal before Hon ble Bombay High Court against the order passed by ITAT in AY 2006-07 and 2007-08. Pr. CIT opined that wherever the order of the Assessing Officer and the Hon'ble tribunal are against the stand taken by the Department in A.Y. 2006-07, remedial action if available is being taken in consonance to the stand of the Department in A.Y. 2006-07 which is that the income of the assessee after omission of section 10(20A) is taxable w.e.f. A.Y. 2003-04. 8. Further, Pr. CIT rejected the citation of the various decisions of Hon ble Supreme Court i.e. in the case of Malabar Industrial Company Ltd vs. CIT 243 ITR 81 and CIT vs Max India Ltd. 295 ITR 282. Further, he observed that only one view is possible and that is the acts of the assessee company are not the acts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferent view. Further, he brought to our notice whether assessee should be held as an agent of the State or an authority of the State (i..e arm of the State). He submitted that assessee was incorporated as company on 17.03.1970 with share capital, which was wholly and exclusively subscribed by the Govt. of Maharashtra with an object of creation of new town of Navi Mumbai, new Aurangabad, new Nashik and other projects in the State of Maharashtra. For that proposition, he brought to our notice the various notifications issued by the Govt. of Maharashtra which is placed in the paper book. Specifically, he brought to our notice at page no. 209 of the paper book, which is a notification issued on 18th March 1970, as per which, assessee has to carry on industrial and city development in the Bombay City in order to reduce the congession in various areas. As per the above notification, assessee was specifically to act as agent of the Govt. for the development of the areas with a view to secure the objects as per the notification. Further, he brought to our notice at page no. 215 and 218 of the paper book in which, assessee was appointed as new town development authority and asked to develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Authority and Spl. Planning Authority, assessee is held to be an agent of the State Govt and submitted that this clearly establishes that assessee is a designated agent. In this regard, he specifically explained the meaning of the term Agent , which is defined as under:- Section 182. Agent and Principal defined An agent is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the Principal . 12. He further submitted that agent can be decided only based on the documents and in this case, resolution passed by the State Govt. as Agent . Further, he brought to our notice the decision of ITAT in assessee s own case, which is placed in the paper book at page no. 198 for AY 2006-07, wherein Hon ble ITAT has already decided that assessee is an agent of the Govt and in brief, he explained the status of the finality of the assessments of the previous assessment years. i.e. AY 2003-04 to AY 2013-14. He explained that from AY 2003-4 to 2005-06 and 2007-08, Hon ble ITAT held that assessee is an agent and department is not in further appeal before Hon ble Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allenged before Hon ble Bombay High Court. Since the above appeal filed by the department is pending before Hon ble High Court, the orders passed by the AO is not following the stand which has been taken by the department, would in the nature of erroneous order in so far as they are prejudicial to the interest of revenue. He strongly objected to the stand of the Pr.CIT and relied upon the decision of Hon ble Bombay High Court in the case of Gabriel India Ltd. He further submitted that even though in the assessee s case, there is only one possible view, but even otherwise two possible views are possible and the ITO has taken one view for which, Commissioner does not agree, it cannot be treated as erroneous or prejudicial to the interest of revenue. In this proposition, he relied upon the decision of Hon ble Supreme Court in the case of CIT vrs. Max India Ltd (2007) 295 ITR 282 (SC). 15. He brought to our notice the decision in the case of Maharashtra Industrial Development Corporation Mumbai vrs. Dy. Director of Income Tax, in which Hon ble High Court of Bombay observed from the submission of the counsels representing the assessee referred to the decision of Hon ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xxx xxx xxx (4) Every Development Authority shall be a body corporate with perpetual succession and a common seal with power to acquire, hold and dispose of property, both moveable and immoveable, and contract and sue or be sued by such name as may be specified in the notification under sub-Section (2) . Section 114 lays down the object of Development Authority and sub-section (1) thereof is extracted below: 114(1) The objects of a Development Authority shall be to secure the laying out and development of the new town in accordance with proposals approved in that behalf under the provisions of this Act, and for that purpose every such Authority shall subject to the provisions of section 113A have power to acquire, hold, manage and dispose of land and other property to carry out buildings and other operations, to provide water, electricity, gas, sewerage and other services, amenities and facilities and generally to do anything necessary or expedient for the purpose of the new town or for purposes incidental thereto. Section 116 empowers Development Authorities to acquire lands. Section 118 deals with disposal of lands by Development Authorities and subsection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, and the comparative speed with which such work can be undertaken and completed in the public interest, if the work is done through the agency of a corporation including a company owned or controlled by the State or a subsidiary company thereof, set up with the object of developing an area as a new town, the state government may, notwithstanding anything contained in sub-section (2), require the work of developing and disposing of land in the area of a new town to be done by any such corporation, company or subsidiary company aforesaid, as an agent of the state government; and thereupon, such corporation or company shall, in relation to such area, be declared by the state government, by notification in the official gazette, to be the New Town Development Authority for that area. MIDC is a corporation which would fall under subsection 113(3A) whereas the Development Authority falls under section 113(2) of MRTP Act. The circular issued with reference to MIDC is therefore of no assistance to contend that land leased by the Development Authority to appellant is a government land. The contention of appellant that the Development Authority is the agent of state government and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Govt of Maharashtra and assessee was eligible to claim the expenditure it incurs on the project, inclusive of administrative expenses thereto plus agency remuneration of ₹ 3 lakhs for the year ended 31st March 1971 to be increased each year by ₹ 1 lakhs subject to a maximum of ₹ 5 lakhs for any one year. Therefore, the maximum remuneration available to the assessee to claim is ₹ 5 lakhs and the same was declared by the assessee in its return of income and offered to tax. 21 Ld. Sr. Counsel objected to the observation of Pr. CIT that it is the only one view possible in the case of assessee, he submitted that it is not the only one view possible whereas Pr. CIT deciding the issue only on Article 289 of the Constitution, whereas the assessee submitted before the AO that it is not claiming under Article 289, whereas it has offered the income of the assessee as agent of the govt. of Maharashtra and the whole income was offered to tax. Therefore, AO accepted the view of the assessee that assessee is an agent of Govt. of Maharashtra and never claimed deduction under Article 289 of the Constitution, therefore it is two views, view of the AO that assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. The Union of India has preferred this appeal. The learned Additional Solicitor General, appearing for the Union, fairly concedes that so far as the merits are concerned, the department can have no grievances, since the High Court has only set aside the order of the Assistant Collector and remanded the matter back for a proper consideration and a proper order. We are, therefore, not called upon to enter into the merits of the classification in the present case except to observe that the decision of the Tribunal in the case of M/s. Chetna Polycoats Pvt. Ltd. was the subject matter of Civil Appeal No. 2321 of 1989 preferred by the department which was dismissed at the stage of admission by this Court on 13th February, 1991. 5. The learned Additional Solicitor General, however, submits that the learned Judges have erred in passing severe strictures against the two Assistant Collectors who had dealt with the matter. He submitted that these officers had given reasons for classifying the goods under heading 39.19 and not 85.46 and could do no more. He submitted that they acted bona fide in the interests of Revenue in not accepting a claim which, they felt, was not tenable. 6. Sr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion of the assessee. Further he submitted that assesse is a separate legal entity and the income of the assessee is taxable under the Income Tax Act 1961 and he relied upon the case of Adityapur Industrial Area Development and support the order of Pr. CIT in its essence. 23. Considering the rival submission and material placed on record as well as order passed by Pr.CIT u/s 263 of the Act, we observe that assessee is a statutory body and incorporated on 17.19.70 with the entire share capital subscribed by the Govt. of Maharashtra and Govt. of Maharashtra appointed the assessee as new town developer and spl. planning authority for the development of Mumbai City. In the resolution passed by the Govt. of Maharashtra, assessee was appointed in exercise of powers conferred u/s 113(3A) MRTP Act 1966 as an agent and to function on behalf of Govt. of Maharashtra. The Hon ble High Court of Bombay in the case of Percival Joseph Pareira, both single bench as well as divisional bench has held that the assessee is an agent of Govt. of Maharashtra as per section 113(3A) of the MRTP Act. The question arose whether the assessee should be treated as agent by relying on the decision of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot invoke the provision of section 263 of the Act when two views are possible as held in the case of CIT vrs. Max India Ltd, wherein it was held as under:- 1. In our view at the relevant time two views were possible on the word profits in the proviso to Section 80HHC(3). It is true that vide the 2005 amendment the law has been clarified with retrospective effect by insertion of the word loss in the new proviso. We express no opinion on the scope of the said amendment of 2005. Suffice it to state that in this particular case when the order of the Commissioner was passed under Section 263 of the Income Tax Act, 1961, two views on the said word profits existed. In our view the matter is squarely covered by the judgment of this Court in the case of Malabar Industrial Co. Ltd. v. CIT reported in (2000) 243 ITR 83; as also by the judgment of the Calcutta High Court in the case of Russell Properties P. Ltd. v. A. Chowdhury, Addl. CIT . 2. At this stage we may clarify that under paragraph 10 of the judgment in the case of Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 this Court has taken the view that the phrase prejudicial to the interests of the revenue under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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